Employers need to start preparing for new rules governing the treatment of staff on zero-hours contracts

1 December, 2015

by: Cripps

Figures from the Office for National Statistics (ONS) show some 697,000 people in the UK were on zero-hours contracts for their main job between October and December 2014. These are arrangements under which an individual undertakes to perform work when it is offered by an employer, but where there is no certainty of work.

Although zero-hours contracts can be beneficial to both employers and employees, they can be misused and the Government is determined to bring in legislation to regulate their use.

Of particular concern have been exclusivity clauses in zero-hours contracts, which, in effect, tie the individual to working for just one employer. Although there may be situations where they are justified – for example in a competitive market where confidentiality is important – they have been widely criticised.

The Government has now published the draft Exclusivity Terms in Zero Hours Contracts (Redress) Regulations 2015 and guidance on zero-hours contracts. The draft regulations provide unfair dismissal rights for workers working under zero-hour contracts who have been unfairly dismissed because of, or principally because of not complying with an exclusivity clause. It is important to note that workers on zero-hours contracts do not need two years’ continuous service to rely on this right. The draft regulations also provide a right for workers on zero-hours contracts to not be subjected to any detriment by employers because they have failed to comply with an exclusivity clause.

The Government guidance states that the use of zero-hours contracts may be appropriate in certain situations, for example in new business start-ups or for covering sickness absence. Zero-hours contracts should however not be seen as a permanent arrangement where an employer cannot justify their use.

When recruiting new employees on zero-hours contracts, employers will have to clearly advertise the role as “zero hours” and they need to make it clear that there are no guaranteed hours. The guidance also sets out how employers should deal with cancelling work and recommends that employers have a policy in place which explains when and how they might cancel work.

Key points to also consider include:

Holiday pay

Workers and employees are entitled to 5.6 weeks’ paid holiday each year. The difficulty with individuals on zero-hours contracts is the proper calculation of their entitlement. It is usually easiest to calculate holiday entitlement based on the number of hours worked. Accrual is at the rate of 12.07% per hour worked (5.6 weeks divided by 46.4 weeks). Whilst some employers still roll up holiday pay this practice should no longer be operated.

National minimum wage

Zero-hours employees are entitled to be paid the NMW. This covers the period the individuals actually work – including travelling (but not commuting) time – as well as time spent on call while on the employer’s premises.

Statutory sick pay

Qualifying employees are entitled to SSP. Anyone paying Class 1 National Insurance contributions will satisfy this requirement. The individual will also need to show they have had average weekly earnings of £109 per week in the previous eight weeks, although this may be difficult for those on zero-hours contracts to achieve.

Forcing zero-hours staff to come to work

If the zero-hours contract is a genuinely casual arrangement, the individual is not obliged to accept any of the hours offered. There is a risk that someone who persistently refuses work when an employer offers it may ultimately influence the employer to terminate the arrangement. It is not however good practice for an employer to try to force the worker to work, as this may call into question whether or not this is a genuinely casual arrangement, and it is likely to adversely affect staff morale and productivity.